India, the European Union, the United States, and Saudi Arabia signed a deal on 9 September to begin the formation of the India-Middle East-Europe Economic Corridor (IMEC) on the sidelines of the recently concluded G20 summit. Leaders from India, Italy, France, Germany, the United States, the European Union, and Saudi Arabia have all signed the memorandum of understanding.
Prime Minister Narendra Modi played a pivotal role in the announcement of this corridor during the summit. He expressed his unwavering belief that IMEC would usher in a new era of global connectivity and sustainable development. Furthermore, he underscored the corridor's vital role as a means of fostering economic integration between India, West Asia, and Europe.
This ambitious project is set to be developed as part of the Partnership for Global Infrastructure Investment (PGII) initiative, which includes the G7 nations. The primary objective of PGII is to address the infrastructure gap prevalent in developing countries. In light of this, the new IMEC project is seen as a direct response to China's Belt and Road Initiative (BRI). Although the official cost of the project has not yet been disclosed, preliminary reports suggest that the participating countries may allocate an estimated $20 billion towards its development.
So, how exactly will IMEC operate?
According to official information, the project will comprise two distinct corridors. The east corridor is slated to serve as a vital connection between India and the Gulf countries, while the northern corridor will link the Arabian Gulf with Europe. Both corridors will encompass a ship-to-rail transit network designed to create cost-effective transportation routes for the participating countries.
The memorandum of understanding explicitly outlines its purpose to facilitate the transit of goods and services between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe. In addition, there are plans to establish a cable network for electricity and digital connectivity, as well as pipelines for exporting clean hydrogen.
EU President Ursula von der Leyen has hailed IMEC as the most direct connection between nations, potentially reducing travel time by 40%. Likewise, US President Joe Biden has referred to the project as 'a significant undertaking'.
The genesis of speculation surrounding the corridor can be traced back to May, during a meeting in Riyadh, where national security advisors from the United States, India, Saudi Arabia, and the United Arab Emirates convened. During this meeting, Jake Sullivan, a US national security official, emphasised the shared vision of a secure and prosperous Middle East region with strong connections to India and the broader world.
IMEC, in essence, serves as India's response to China's BRI. Tensions between India and China escalated following the Galwan Valley clash in 2020, leading India to impose various restrictions on Chinese firms and actively seek to attract manufacturing companies from neighbouring countries.
To address concerns surrounding geopolitical tensions between the US and China, the Indian government has implemented incentive programmes aimed at attracting global companies. Critics have chastised the Modi government for its perceived lack of action against China's growing influence. During a press conference, Rahul Gandhi urged India, Europe, and the US to collaborate in developing an alternative and competitive production model to effectively counter China.
The IMEC initiative could play a pivotal role in bolstering the government's efforts to boost the country's exports. Due to global headwinds, India's exports experienced a 16% decline, totalling $32 billion. Quarterly GDP estimates revealed a decrease in the share of exports in GDP, plummeting from 24.4% to 20.9% in the same period last year.
This project's announcement coincides with the ongoing geo-economic competition between the United States and China. In a recent development, the Biden administration is actively working to enhance the World Bank's lending capacity by $25 billion for middle- and low-income countries as part of their strategy to address the challenges posed by China.
China's BRI, launched by President Xi Jinping in 2013, aims to create an extensive network of railways, energy pipelines, and highways connecting various countries across Asia, Africa, Europe, and Latin America. China's foreign ministry reported signing cooperation agreements for the project with over 150 countries and 30 international organisations.
Notably, the IMEC announcement preceded the third BRI conference scheduled to take place in Beijing this year, with approximately 90 countries confirming their participation. Serbia's President Aleksandar Vucic and Argentina's President Alberto Fernandez are among the attendees.
China's BRI recently faced a setback with Italy announcing its intention to withdraw from the project. Italy's defence minister referred to the 2019 decision to join the Belt and Road Initiative as "an atrocious decision". However, during the G20 summit, Italian Prime Minister Giorgia Meloni clarified that no definitive decision had been made regarding Italy's withdrawal from the initiative.
She argued that such a decision would not harm bilateral relations. Italy became the first G7 country to join the initiative in 2019. Interestingly, despite considering withdrawal from China's project, Italy has committed to participating in the IMEC initiative. The proposed economic corridor route through Pakistan-occupied Kashmir has been a longstanding point of contention between India and China, further fueling tensions.
Recent reports indicate that China plans to introduce BRI 2.0, a revised version of the Belt and Road Initiative. This updated version aims to exercise greater control over project expenditures and implement stricter scrutiny when announcing new projects. These changes are prompted by the global economic slowdown, which coincides with rising interest rates and inflation.
The Centre for Global Development projects that China may allocate a staggering $8 trillion to the project, which has faced criticism for potentially creating a "debt trap" for low-income nations. It's estimated that China has already invested more than $1 trillion in BRI projects.